tv Nightly Business Report PBS June 14, 2012 7:00pm-7:30pm EDT
>> this is n.b.r. >> susie: good evening. i'm susie gharib. borrowing costs spike in spain as the financial crisis deepens. >> tom: i'm tom hudson. sheila bair used to be a top banking watchdog, now she's back, fighting to make big banks safer. >> susie: and the print industry may be a dying trade, but one california publisher is bucking the trend. we have that story in tonight's "made in america." >> tom: that and more tonight on "n.b.r.!" >> susie: high anxiety in europe today, and for business leaders and investors around the world. greece goes to the polls this weekend, and many fear voters will opt to turn down bailout money, and exit the european union. and there were new developments
in spain today, signaling that country might soon be in desperate need of a bailout. >> reporter: it was a clear warning flag: yields on spanish government bonds surged to 7% today, after moody's investors service cut its rating by three notches to just above junk status. that typically means a bailout might be needed. germany has been the go-to source for rescue packages, but chancellor angela merkel said today, her country cannot save europe on its own, adding germany's resources are "not unlimited." some international experts says the best solution, and what investors want to see, a unified effort to rescue troubled nations. >> it would have to be a combination of the europeans as well as maybe the i.m.f. coming in, and so i think if those two would pool their resources i think the resources are there but the question is are spanish leaders willing to do what's need on their part for the
europeans and the i.m.f. to come to their aid. >> susie: how to solve the financial crisis will certainly be the big topic when world leaders meet monday in mexico, for a g-20 meeting. they may also hold separate talks on the outcome of the greek election. reportedly, central banks are already preparing coordinated action, to pump money in the european financial system, if the greek elections cause tumultuous trading. >> a thriving small business that is no ode joe. "nightly business report" is brought to you by: captioning sponsored by wpbt >> susie: on wall street, stocks rose sharply, on hopes the federal reserve might come up with another round of stimulus.
the dow surged 155 points, the nasdaq rose almost 18, and the s&p 500 added 14. consumer prices dropped 0.3% in may. lower energy prices get the credit. stripping out food and energy, core inflation rose only 0.2%. and more americans filed for first-time unemployment benefits in the past week, up by 6,000 to 386,000. with all the turmoil and economic uncertainty in europe, investors around the world are nervous, and looking for safe places to put their money. as erika miller explains, some latin american countries may be relatively well positioned to weather the global downturn. >> reporters: it has nothing to with how far away latin american countries are europe, but their positions financially. over the past few years, many have built up big rainy-day funds. and some, like peru, have government debt levels that are small relative to their economic outputs.
>> it's debt burden is actually lower today than it was in 2008. we are talking about a 20% of g.d.p. compare that with 80 to 90% of g.d.p. we see these days in the developed world. >> reporter: chile's government debt is even lower: only about 10% of g.d.p., and it has the highest credit rating in latin america. >> this is really a country with a very long track record of macroeconomic stability. its policy framework is very strong. >> reporter: but if the crisis in europe escalates, the eurasia group believes mexico will be one of the better emerging market bets. >> we have a new president coming on board that is going to assume office in december. and we think that the reforms that are going to be well-viewed by investors are going to be directly proportional to the size and severity of the global economic slowdown. >> reporter: there's almost no disagreement on which latin american countries are most vulnerable to ripple effects from europe. >> we would caution to at least look at the countries that are more heavily dependent on
commodity prices from their growth perspective. so countries like venezuela, argentina. >> reporter: for venezuela, the reliance is on oil. for argentina, it's soy. no country is immune to what happens in the eurozone, but many believe that latin america can better withstand the shockwaves from europe now, than they did from the u.s. in 2008. erika miller, "n.b.r.," new york. >> tom: whether we're talking about spain, italy or greece, the term "systemic risk" has a way of creeping into the story. it's any threat that can bring down the entire financial system. sheila bair is the former head of the federal deposit insurance corporation, it was her job to help protect banks and their depositors from systemic risk during the financial crisis, and now she's back on watch. darren gersh reports. >> reporter: as f.d.i.c. chairman sheila bair rubbed many people the wrong way. critics complained she was too outspoken, wanted to go to far when it came to policing risky banks.
now out of government, bair is back in the fight once again she's taking on risks that threaten to bring the entire financial system crashing down. >> i define systemic risk is a practice or an institution that, if there is a sudden, unexpected loss, that the stakeholders, those who willingly took the risk, they should take loss, but there is collateral damage to the broader economy. it's when there's a spillover to the broader economy, that's when we have a systemic situation. >> reporter: now the dodd-frank wall street reform law was supposed to get it's arms around systemic risk. it was supposed to contain it. did it do the job? >> well, i think it has the potential to do the job. but i think there is still a lot of work to be done. i think the financial stability oversight council has not exerted a lot of leadership in trying to get ahead and address systemic risk. it has been disappointing. i think the tools are there, but they haven't used them effectively yet. >> reporter: well why not? is it because the regulators don't want to do it? >> i think there are a number of
reasons. one, the lobbying has been relentless. and i think some of the regulators are gun shy, and you can understand why. the lobbyists go to the hill and congress has put some pressure on regulators who are really just trying to do the right thing. the process itself has been a problem. you kind of had this negotiated process among agencies and that leads to a lot of complicated rules, a lot of rules and exceptions and special provisions. it enables the industry lobbying because they can shop their position among the various regulators. so the lobbying is a problem, but the process itself has been a problem. >> reporter: the dodd-frank law is only two years old and the rules to enforce it are not yet fully in place. but it is as controversial now as the day the president signed it into law. just yesterday, j.p. morgan chase c.e.o. jamie dimon called the law too complicated. markets, he said have self- corrected following after the financial crisis. >> a lot of what caused the problem don't exist anymore. and that wasn't because of regulations, it was because of markets. >> reporter: bair disagrees.
>> well, gee, i hardly know where to start. the government is guaranteeing so much right now. the insured deposits have exploded. we're guaranteeing almost all of the mortgage market now. there is so much government backstop now and of course we have the hangover from the bailouts themselves. so saying you have the market correcting when you have all of this government support is not something i would agree with. >> reporter: and bair points out j.p. morgan chase was using money from government-insured deposits to place those risky trades on credit default swaps. losses on those trades could cost the bank up to $5 billion. >> with all this government support, i am not sure that we have the market discipline that we need to contain risk. and so i think there is a lot more work to be done. >> reporter: to counter the pushback from critics like dimon, bair has launched a
private sector watchdog group to monitor and encourage more aggressive reforms. >> we're not anti-industry, we're not anti-regulator, we're independent. >> reporter: and we will be trying to represent the public interest in this debate. >> reporter: thank you. >> tom: the economy and jobs most in focus for president obama and republican challenger mitt romney today. both candidates were campaigning in the swing state of ohio. as the political rhetoric on the campaign trail continues so does the stalemate over taxes in washington. we spoke with columbia business school professor
joseph stiglitz, author of the price of inequality. and we staed with what the price of income inequality is for america's economy. >> most americans are worse off than they were say 15 years ago. just coming in from the fed points out that they have a lower level of wealth than they had say 20 years ago. meanwhile, we become the country with the least economic opportunity of any of the advance industrial countries to look at this data. >> are you equating financial inequality with unfairness, with an unfair economy? >> if you look at the people who are at the top, they're not the people who really transformed our economy. they're not the inventors of the laser, the computer, the discover the dna. they're people who manipulated the system. they're people monopolists who actually use their
monopoly power to contract output to increase their profit. >> according to the census bureau the percent of households making over $200,000 per year is close to the highest it's been since the census bureau began tracking this since the late 1960s so there are more americans at that top ten 10 then there has ever been before. isn't that an indication of the opportunities that have been out there in this economy? >> one way of looking at it is the fraction of the income that goes to the top 1% today is twice what it was in 1980, about 20%. >> all right. >> going to the top 1%. >> the census bureau finds 2 1 percent of the nation's income goes to the top five percent of households. these are folks making over $181,000 or rather in 2010 figures. all of those income earner does face higher taxes next year with that coming fiscal cliff. you know, give us an idea of some public policy remedies that will go after this
inequality that you've identified. and have called. >> the top 1% pays an average rate of 15%, less than those who work for a living. and that again distorts our economy because the way they got those lower taxes is because capital gains with low rate, speculation is taxed at a low rate. so one of the easy things to do is to create a fair tax system where speculators are taxed just like workers. >> narrator: so we have he-- . >> tom: you've got more from the nobel prize winning economist joseph stiglitz. you can hear what he thinks about the european debt crisis as well as the u.s. federal reserve.
>> susie: pink slips could go out to thousands of u.s. factory workers if the government ends subsidies to the wind industry. a production tax credit for wind expires at the end of the year. as diane eastabrook reports, this uncertainty has left some industry suppliers spinning their wheels. >> reporter: most of the giant wind turbines sprouting from america's landscape are here because of a two cent per kilowatt hour tax credit that's been around for most of the last two decades. ending the credit could potentially take the wind out of the wind industry. winergy drive systems just outside of chicago is bracing for that possibility. workers are rushing to make gear boxes for turbines that will be installed before the tax credit expires in december. but c.e.o. terry royer worries because orders are beginning to slow. >> if you go to my customers and they go to their customers which are the energy producers they would say you know what, we are
not planning much work in 2013 because we don't have certainty that we're going to have this tax credit when we have our wind farm. >> reporter: billions of dollars in government subsidies have helped the industry grow over the past decade, up 2,000% since 2000. despite that, wind energy still accounts for only 3% of the electricity generated in the u.s. some experts don't think renewable energy sources like wind make sense now that natural gas is plentiful and cheap. but others say you can't always count on cheap gas. >> just a couple of years ago it was extremely expensive and very risky for utilities to bank on. so, the real value in sources of energy like renewables, is the cost of energy, the fuel cost is essentially zero. >> reporter: kaplan says government subsidies have helped improve wind technology, making it more efficient. still he doubts the industry can maintain that momentum without a helping hand from uncle sam. diane eastabrook, "n.b.r.,"
elgin, illinois. >> susie: one-time texas billionaire allen stanford was sentenced today for one of the biggest ponzi schemes in u.s. history; 110 years behind bars. stanford was convicted of swindling investors out of $7 billion. at his sentencing, stanford said he did nothing wrong. >> on wall street today tomorrow, a lot of good action, but what happens next depends on what happens over the next couple of days. those greek elections on sunday, the g-20 meet on monday and the fed meeting on tuesday and that could really dictate where stocks go from here. >> tom: a lot of event risk is the way they put that, lots of headline risk, lots of anxiety but lots of hope as well. let's get to tonight's market focus. with borrowing costs rising in spain and the greek elections coming, reuters reported late today central bankers are ready to provide more stimulus if necessary. the s&p 500 had moderate gains
early in the session, and had a strong pop after the assurances regulators are preparing a coordinated effort if one is necessary after the greek elections. by the close, the index had rallied 1%. volume: 777 million shares on the big board, 1.6 billion shares on the nasdaq. leading the gains, the telecommunications sector up almost 2%. the energy and consumer discretionary sectors rallied 1.7% and 1.4% respectively. the telecom sector rose despite global handset maker nokia announced a management shake-up and 10,000 job cuts. it's the latest response by the finnish company to meet the challenge of competition from apple's iphone and devices running google's android software. the u.s listed nokia shares took a nose dive, falling almost 16%. volume was huge, more than 110 million shares trading. shares have been sinking since early april when it sharply reduced its financial forecast. owners of the three biggest wireless carriers in the states were stronger. sprint-nextel jumped 5.4%, over $3 per share for the first time since september.
at&t is at a new 52-week high, up 2% on stronger than usual volume. and verizon gained 1.8%, also closing at a new 52-week high. verizon announced a new pricing plan for its wireless business. at&t is expected to do the same. energy prices caught some heat today, especially natural gas, seeing a big jump as demand seems to be picking up. natural gas prices jumped 14% after weekly government data found a smaller than anticipated increase in supplies. that led the market to think demand has picked up after months and months of low demand. natural gas prices have suffered under record supplies thanks to new production techniques, and low demand due to the warm winter and weak economy. independent oil and natural gas producers benefited from the rally. cabot oil and gas shot up 8.6%. w.p.x. energy was up 4.5%, and southwestern energy gained 4.3%. independent explorer apache also helped the energy stock rally. in a meeting with analysts the company talked up its portfolio of energy fields it has purchased over the past two and a half years. it now says it will shift its focus from acquisitions to developing these areas, expecting oil to lead the company's growth. encouraging medical news for edward life sciences carried
that stock to new highs. today's 7% rally came as an f.d.a. advisory panel endorsed the company's artificial heart valve. the device can be used for patients who cannot have open heart surgery. and a couple of food-focused stocks. super market chain kroger reported stronger than expected earnings and raised its forecast. shares were up 6%, but pork producer smithfield fell almost 6% after a disappointing quarter. in our exchange traded fund market flash, all five of the most actively traded e.t.f.s were higher, led up the financial sector fund, up 1.2%. and that's tonight's "market focus."
>> susie: tonight, we continue our week long series on small business with one that's been brewing in manhattan. "joe" is a small and thriving chain of gourmet coffee shops, where a great cup of joe is the priority. suzanne pratt reports. >> reporter: jonathan rubinstein loves coffee, the taste, the smell, and the sound. so much so that he did what many people might think impossible: start a successful chain of coffee bars in new york city. when he opened the first "joe" here in the west village in 2003, there was only one competitor, albeit a big one. >> in my opinion starbucks is great and certainly back then it was pretty well received by new yorkers, but i thought that we could do something better and i thought that new yorkers would get it. >> reporter: and, boy did they get it. joe was a quick smash, profitable in its first year. today, there are nine joes in new york city and 150 employees. there's also a website and
catering business. still, here in new york for every joe there are dozens of starbucks. new yorkers consume gallons of coffee, and, not just tall caramel frappuccinos. there are plenty of coffee purists. so, why not open more joes? rubinstein says they might. but, staying small can be beautiful, too. >> we can go to each shop everyday if we need, we're very in touch with the staff and we know everyone by name. and, we do worry if we open too many or we try another city, we'll lose that magic of still feeling like you're part of the community and still having this ma and pop feeling will go away. >> reporter: speaking of ma and pa, joe is a family run business, probably part of its success. rubinstein's father bankrolled the first store, and today, his sister is a partner. >> we've never not gotten along in business and in life. i think we got lucky when we were little kids. i came home on his fourth
birthday i was born, and he took to me literally like i was his and we've gotten along ever since. >> reporter: still, customers say the key to joe's stamina in a city often unkind small businesses, is the product. >> the staff is super friendly, always smiling. and, the coffee is amazing, really great, it tastes a little nutty. i don't know if i'm just making that up. but, it's really yummy. >> reporter: suzanne pratt, "n.b.r.," new york. >> reporter: i'm sylvia hall. tired of the nine-to-five? tomorrow we'll talk to some people who dropped their office jobs in favor a fresh start. >> tom: also tomorrow: what to expect from the markets after this weekend's key election in greece. and our friday "market monitor," john dorfman of thunderstorm capital is shopping for auto stocks. >> susie: it's no secret that new media, the internet and digital devices, has taken a large bite out of print, newspapers, and magazines.
but there are some notable exceptions. we profile a company that proves we might not be seeing the "sun- set" on old media. mike hegedus has this week's "made in america". it is sunset magazine. >> reporter: they have been putting together sunset magazine since 1898. it started as a means of drawing tourists west by the southern pacific railroad, it is the largest lifestyle publication this side of the rockies. >> we have 1.25 million subscribers, and our total audience is about 4.7 million. >> reporter: based in menlo park, it's seven acre campus is home to a test kitchen; every recipe in the book vetted here. and working gardens, if it grows in the west, or doesn't, they know about it first. >> reporter: sunsets western gardening book having sold over six million copies, the latest version the best selling book of its kind this year, both food and gardening are bedrock under the sunset foundation, but
magazine bedrock has been crumbling. so how has the sunset brand, a division of time warner, managed to stay strong, relevant, desirable? by throwing a party. >> reporter: this one of several events that sunset puts on yearly. it's called bringing the brand to life. 20,000 people over two days, and nobody likes it more than one very important group. >> it's a really fun event and that actually is of great interest to our advertisers right now to bring the brand to life and to introduce consumers directly to the brand. >> audiences today expect that its a dialog, it's not a one way street. >> reporter: along with events, sunset engages in a multi- pronged business strategy. a million unique views a month on its web page. an ipad application, licensing, custom publishing; sunset does books for pillsbury, weber grills, and now is even branding and selling its own line of plants. >> sunset editors worked with
plant development companies to come up with a list of the very best news plants for western gardens. >> reporter: sunset magazine, sowing the seeds of new business in the shifting soil of modern media. is that chicken stew? mike hegedus, "n.b.r.," menlo park, california. >> tom: the federal reserve recently announced, three years of the economic crisis wiped out two decades of financial gains money magazine's donna rosato has a to-do list to make repairs. >> reporter: first, focus on boosting your earnings, the biggest source of income for most people. post-recession, raises and bonuses are back, but the biggest rewards go to those who show they are making significant contributions. document your accomplishments so you have more leverage when you ask for a raise or promotion. if you're not satisfied, start looking for a new job, where you're likely to get a bigger bump up. outside hires earn an average 18% higher pay than those promoted from within.
next, evaluate your tax situation. you can hang onto more of your money by sticking to lower cost e.t.f.s over mutual funds, maxing out your 401-k and fully funding flexible spending accounts. finally, simplify your savings. set everything on autopilot through your 401-k and regular transfers to a savings or brokerage account. revisit those accounts every year and increase savings regularly. make sure you consolidate your investment and retirement accounts too. it'll be easier to track your progress and you'll see how well you're doing. >> that's it for the broadcast this evening, have a wonderful night. >> same to you, tom, i'm susie gharib. wish we'll see all of you on-line and back here t omorrow night. "nightly business report" is brought to you by: captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org